February 9, 2016 Newsletter

Dear Friends,

Tangents:

THE YEAR OF THE MONKEY:

Monkeys (1920, 1932,1944,1956, 1968, 1980, 1992, 2004, 2016): Monkeys are clever, curious, witty and smart.

People born in the year of the monkey are the erratic geniuses of the cycle.  Clever and skillful in grand-scale operations, they are adroit when making financial deals.  They are surprisingly inventive and original and are able to solve the most difficult problems with astonishing ease.  There are few fields in which a person born in this year would not be successful.  Monkey-year people have a disconcerting habit of agreeing with others.  They feel more comfortable when they agree, but this sort of agreement is merely a policy tactic.  If a monkey-year person sets out to do something and is unable to start immediately, he becomes discouraged and abandons the project even before he has actually tried it.  Monkey people have a poor opinion of other people and tend to hold them in contempt.

  Yet monkey people are prized for their skills, talents, and flexibility.  They are good at making decisions and have common-sense practicality.  They are fired with a deep desire for knowledge, and they read, see, and know a great deal.  They have good memories and can recall fine points and details with ease.  They are also passionate and strong-natured, but they tend to cool off quickly.  They become famous if they are allowed to pursue their own course.  Monkey people, for all their negative qualities, are needed for their skills.

  The second phase in the monkey person’s life is the worst, for he will be distracted and confused, and plans will go awry.  The monkey-year man’s relations with women will not be good.  Monkey-year people must also be careful about over explaining, for by talking too much they will drive people away.

  The best marriage partner for monkey people would be someone born in the dragon or the rat year.  The next best would be a person born in the year of the rabbit, sheep, or dog.  A bad marriage would be one with a snake-year or a boar-year person and the worst would be with someone born in the tiger year. –by Reiko Chiba.

February 9, 1964:The Beatles performed on the Ed Sullivan show – 73 million people watched the broadcast.

PHOTOS OF THE DAY

Fireworks explode over Victoria Harbor in Hong Kong Tuesday to celebrate the Lunar New Year of the Monkey. Bobby Yip/Reuters

A man burns joss sticks as he prays at the Dongyue Temple in Beijing Tuesday during the second day of the Chinese Lunar New Year. Mark Schiefelbein/AP

Market Closes for February 9^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Jiayue Huang and Anna-Louise Jackson

     (Bloomberg) — Financial and energy companies dragged Canadian stocks lower for a third day, as equities worldwide sank amid deepening concerns about the health of the global economy.

     The Standard & Poor’s/TSX Composite Index slumped 2 percent to 12,282.65 at 4 p.m. in Toronto, the lowest level since Jan. 15. The benchmark gauge has fallen 5.6 percent this year, making it the second-best performing developed market tracked by Bloomberg, after New Zealand.

     While the U.S. market staged an afternoon rebound to finish Tuesday little changed, Canada’s resource-rich benchmark equity gauge was held back by plummeting oil prices. As crude fell more than 4 percent to settle near $28 a barrel, energy companies retreated for a third straight day and all 55 stocks in the industry declined. Ensign Energy Services Inc. plunged 10 percent to its lowest level since 2000.

     Banks contributed the most to losses, joining a selloff in global financial shares amid growing concerns that the rout in oil will weaken lenders’ balance sheets. Lenders in the gauge declined 2.2 percent and only five stocks in the group advanced. Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Montreal all fell more than 2.3 percent.

     Utility stocks fell 4.8 percent, the biggest decline since 2001 and the most among the 10 sectors. Fortis Inc. tumbled 10 percent, the most ever, after agreeing to buy ITC Holdings Corp. for $6.9 billion in cash and stock, adding its high regulated returns in what will be the largest Canadian takeover of a U.S. utility.

     Industrial companies rose 1.1 percent for the biggest gain in the S&P/TSX on Tuesday. Bombardier Inc. increased 2.6 percent, as the company entered partnership with Turkish manufacturer Bozankaya to produce high-speed trains.

US

By Joseph Ciolli

     (Bloomberg) — U.S. stocks slipped, with the Standard & Poor’s 500 Index holding near its lowest since April 2014 while the Nasdaq Composite Index edged closer to a bear market amid declines in energy and technology shares.

     Equity markets are attempting to stabilize after the Nasdaq Composite’s worst three-day selloff since August, and an early drop Tuesday that brought it within 1 percent of a bear market. Whipsaw moves in technology, consumer, health-care and industrial companies sent stocks careening between gains and losses throughout the session. Raw-material companies rallied amid weakness in the dollar, while energy sank with oil prices.

     The S&P 500 declined 0.1 percent to 1,852.21 at 4 p.m. in New York, after erasing an early 1 percent loss and climbing as much as 0.8 percent. The Nasdaq Composite Index fell 0.4 percent after lurching between gains and losses. The Dow Jones Industrial Average swung more than 255 points from session low to the high before closing down 12.67 points, or 0.1 percent, at 16,014.38. About 10 billion shares traded hands on U.S. exchanges, 26 percent above the three-month average.

     “It’s quite a tussle between the bulls and bears,” said John Carey, a Boston-based fund manager at Pioneer Investment Management Inc., which oversees about $230 billion. “Some people think this is a temporary setback and that the market maybe got a little ahead of itself — that nothing is really wrong with the economy and this is a good buying opportunity. Others think the market is indicating a slowdown in months ahead.”

     Speculation that Deutsche Bank AG is considering buying back billions of its bonds fueled an afternoon rebound in equities. Deutsche Bank’s U.S.-listed shares trimmed declines of more than 4 percent after the Financial Times report on the bond repurchase. The bank’s perceived creditworthiness and a fresh rout in crude added to doubts about the strength of the worldwide economy.

     Declines in banks and technology stocks have weighed on U.S. equities in the market’s latest rout, the worst for the Nasdaq Composite since August. The gauge briefly rebounded today after approaching a bear market before closing lower, down about 18 percent since its record last July.

     As global stocks near a bear market, volatility is on the rise. The Chicago Board Options Exchange Volatility Index rose 2.1 percent to 26.54, trimming an earlier 9 percent gain when it briefly touched a five-month high. The measure of market turbulence known as the VIX jumped 20 percent in the prior three days.

     Among the S&P 500’s 10 main industries, energy was hit hardest, falling 2.5 percent. Phone companies lost 1.1 percent. Tech shares slipped 0.4 percent, after erasing a 1.3 percent drop to rise by the same amount. Raw-materials, consumer staples and health-care rose at least 0.6 percent.

     Oneok Inc. sank 11 percent, taking its two-day drop to 19 percent. Chevron Corp. tumbled 3.6 percent, while Southwestern Energy Co. and Consol Energy Inc. fell at least 10 percent. West Texas Intermediate crude futures settled at $27.94 a barrel, down 5.9 percent.

     “Oil is still very much in the picture, and it’s injecting concern about the financial viability of companies in the industry,” said Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates Inc. in Bethlehem, Pennsylvania. “That’s spreading to banks given their exposure to loans within the sector. Credit sensitivity is more at the forefront than it has been.”

     International Business Machines Corp. declined 2.3 percent, and Oracle Corp. sank 1.5 percent to help drag the tech group lower. Facebook Inc. and Google parent Alphabet Inc. finished little changed after roaming between both gains and losses of at least 2.2 percent.

     A gauge of lenders in the S&P 500 has plunged more than 25 percent since a July peak to its lowest level since October 2013 as bearish sentiment intensified this month. Nine of the 17 members of the S&P 500 Banks Index have lost at least 20 percent just this year.                    

     Raw-materials were led higher by Martin Marietta Materials Inc., which rose 9.4 percent, after forecasting that its shipments of crushed stone, sand and gravel will rise as much as 7 percent, helping alleviate investor concerns over a construction slowdown. DuPont Co. gained 1.6 percent.

     Health-care shares shook off early losses to rise for the first time in four days. Gilead Sciences Inc. gained 2.3 percent, overcoming a 1.4 percent drop at the open, while Pfizer Inc. increased 1.9 percent, erasing a 0.8 percent loss earlier. Boston Scientific Corp. rallied 5 percent, the most in three months. Its Watchman device, used to reduce the risk of stroke, will be covered by Medicare in a reversal of a U.S. proposal last year.

     Honeywell International Inc. rose 1.2 percent, after falling as much as 1.3 percent, to pace gains among industrials. Transportation companies helped bolster the group, with Union Pacific Corp. and Delta Air Lines Inc. up more than 1.4 percent, shaking off declines of at least 1.3 percent. The Dow Jones Transportation Average increased 1 percent. Masco Corp. gained 8.2 percent after the building products maker’s quarterly profit beat estimates.

     Amid growing concern over China, volatile oil prices and the trajectory of U.S. interest rates, all 24 developed-market indexes tracked by Bloomberg worldwide are down in 2016. Some strategists are losing their resolve in keeping bullish calls on the S&P 500, and have trimmed their year-end projections. The average estimate calls for the benchmark to end December at 2,168 — a 17 percent rally from yesterday’s close, but a gain of just 6.1 percent for the year.

     While the S&P 500’s valuation of 15.4 times the forecast earnings of its members is in line with the average of the past five years, the measure has plunged 13 percent since the start of the year and is at the lowest level since October 2014. The gauge remains more expensive than developed markets in Europe, where the Stoxx 600 Index trades for 13.8 times estimated earnings. That’s down from a record valuation of 17.4 times notched in June.

     Investors have been on guard for any signs of weakness spilling over from China while scrutinizing mixed signals from economic reports and corporate earnings. Federal Reserve Chair Janet Yellen is scheduled to testify before Congress on monetary policy tomorrow and Thursday.

     Data today showed job openings in climbed in December to the second-highest level on record, a sign demand for labor remains strong. A separate measure showed wholesale inventories in December fell less than economists forecast.

     With the onset of the latest bout of financial market turbulence, investors have further cut the probability they see of interest-rate increases, pricing virtually no chance of the Fed raising borrowing costs in March and 4 percent odds in April, down from 17 percent on Friday.

     With the U.S. reporting season more than half way through, about 77 percent of S&P 500 members have so far topped profit estimates, while less than half have beaten sales projections. Analysts estimate earnings at companies in the gauge fell 4.5 percent in the fourth quarter, and will drop another 6.3 percent in the current period.

Have a wonderful evening everyone.

Be magnificent!

I am proud to tell you that I belong to a religion in whose sacred language,

the Sanskrit, the word exclusion is

untranslatable.

Swami Vivekananda

As ever,

Carolann

Strength lies in differences, not similarities.

                   -Stephen Covey, 1932-2012

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7